| Wed 29 Sep 2010, 17:16 | | DON - The Don - Reviewed Financial Results for the year ended 30 June 2010 |
|
DON
DON
DON - The Don - Reviewed Financial Results for the year ended 30 June 2010
The Don Group Limited
Incorporated in the Republic of South Africa
(Registration number: 1946/023123/06)
Share Code: DON ISIN: ZAE000008462
("The Don" or "the Group")
Reviewed Financial Results for the year ended 30 June 2010
Condensed CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 June 2010
Reviewed Audited
Year Year
ended ended
June 10 June 09
R`000 R`000
Revenue 171 486 64 991
Profit/(Loss) before interest and tax 10 043 (4 498)
Interest received 601 460
Interest paid (9 111) (7 183)
Impairment losses - (91)
Profit/(Loss) before taxation 1 533 (11 312)
Taxation (4 002) 1 588
Taxation - Current (1 318) (187)
Taxation - Deferred (2 684) 1 775
Loss for the year (2 469) (9 724)
Attributable to:
- Equity holders of parent (9 201) (8 947)
- Non-controlling interests 6 732 (777)
(2 469) (9 724)
Other comprehensive income for the year - 46 236
- Gross revaluation surplus - 74 396
- Deferred taxation - (28 160)
Total comprehensive (loss)/income
for the year (2 469) 36 512
Attributable to:
- Equity holders of parent (9 201) 37 289
- Non-controlling interests 6 732 (777)
(2 469) 36 512
Number of ordinary shares in issue (000`s) 294 485 294 485
Weighted average number of ordinary shares 294 485 294 485
in issue (000`s)
Loss per share (cents) (3.12) (3.04)
Headline loss per share (cents) (3.10) (3.12)
Reconciliation of headline loss
Comprehensive loss for year
attributable to ordinary shareholders (9 201) (8 947)
Impairment of assets - 91
Loss/(Profit) on disposal of assets 138 (395)
Tax effect of above (38) 111
Minority effect of above (28) (38)
Headline loss (9 129) (9 178)
condensed CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 30 June 2010
Reviewed Audited
June 10 June 09
R`000 R`000
ASSETS
Non-current assets 347 364 349 679
Property, plant and equipment 341 131 341 392
Goodwill 2 338 2 338
Other intangible assets 176 176
Deferred tax asset 3 719 5 773
Current assets 43 704 14 286
Other financial assets 1 244 860
Inventories 559 430
Trade and other receivables 19 183 6 976
Cash and cash equivalents 22 718 6 020
Total assets 391 068 363 965
EQUITY AND LIABILITIES
EQUITY 195 263 197 732
Share capital and reserves 184 570 193 771
Non-controlling interests 10 693 3 961
LIABILITIES
Non-current liabilities 132 739 118 027
Interest bearing liabilities 66 129 52 047
Deferred tax liability 66 610 65 980
Current liabilities 63 066 48 206
Trade and other payables 38 038 17 041
Short-term portion of interest bearing 13 841 20 661
liabilities
Short-term portion of non interest bearing 1 843 1 611
liabilities
Current tax payable 2 445 1 008
Bank overdraft 6 899 7 885
Total equity and liabilities 391 068 363 965
CONDENSED SEGMENTAL ANALYSIS
for the year ended 30 June 2010
Reviewed Audited
June 10 June 09
R`000 R`000
Segmental Revenue
Hotels 58 648 61 736
Travel & Tourism 112 838 3 255
Net Revenue 171 486 64 991
Segmental profit/(loss) before interest and tax
Hotels (9 271) (2 761)
Travel & Tourism 19 314 (1 737)
Profit/(Loss) before interest and tax 10 043 (4 498)
condensed CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June 2010
Share Accum- Revalu- Non
Capital and ulated ation controling
premium loss surplus interests Total
R`000 R`000 R`000 R`000 R`000
Equity at 30 155 914 (124 135) 124 703 - 156 482
June 2008
Total - (8 947) 46 236 (777) 36 512
comprehensive
income
Acquisition of - - - 4 738 4 738
subsidiary
Equity at 30 155 914 (133 082) 170 939 3 961 197 732
June 2009
Total - (9 201) - 6 732 (2 469)
comprehensive
loss
Equity at 30 155 914 (142 283) 170 939 10 693 195 263
June 2010
Condensed CONSOLIDATED statement of cash flows
for the year ended 30 June 2010
Reviewed Audited
June 10 June 09
R`000 R`000
Operating activities 18 210 (3 255)
Investing activities (9 627) (4 621)
Financing activities 9 101 2 491
Net cash inflow/(outflow) 17 684 (5 385)
Cash and cash equivalents at beginning of (1 865) 3 520
year
Cash and cash equivalents at end of year 15 819 (1 865)
Net asset value per share (cents) 66.31 67.15
Net tangible assets value per share 65.46 66.29
(cents)
Capital commitment (R`000) - 8 000
Commentary
OVERVIEW AND FINANCIAL RESULTS
The board of directors of The Don ("the board") is pleased to report an increase
in turnover of 164% from R64.9 million in the previous comparative period to
R171.4 million for the financial year ended 30 June 2010 ("the reporting
period"), which coincided with the hosting of the FIFA Soccer World Cup ("SWC")
by South Africa.
This impressive increase in revenue resulted from the board`s decision to expand
The Don`s primary business focus beyond that of `Suite Hotel` operations. The
Group`s investment in 2009 of a 51% stake in iKapa Tours & Travel (Proprietary)
Limited ("iKapa") contributed R112.8 million in revenue during the reporting
period, up from R3.3 million which it contributed during the last two months of
the previous comparative period.
`Football fever` helped the `Travel & Tourism` segment, through iKapa`s
successful management of soccer supporter operations in Cape Town and Nelspruit,
as well as a cruise liner project that delivered a pre-tax profit exceeding R18
million, to generate income and ride out the prevailing economic turbulence.
The Don Suite `Hotels` segment however, did not fare as well. Although, as a
result of the SWC, The Don generated revenue of R12 million during the month of
June 2010, on the whole, the SWC did not deliver to the extent anticipated so as
to offset the low accommodation demand and price-war-induced-tariffs which
persisted throughout the financial year.
The release of additional rooms by the FIFA booking agency, Match, as a result
of the drastic fall-off of anticipated SWC visitors to South Africa, and the
consequent industry-wide lowering of accommodation rates, added to the pressure
on The Don`s income stream as well as market share.
The Don was nonetheless, as a result of the release of rooms by Match, able to
secure occupancies through newly engaged internet booking services, with a
single `search engine` delivering suite reservations totaling R425 000 in one
month alone.
Partly as a result of the SWC, the hospitality sector has become grossly over-
traded. The entry and expansion of deep-pocket hotel groups has impacted
negatively on The Don`s business in Gauteng and Cape Town. In Sandton alone, new
hotels have increased capacity by an additional 773 rooms, and in Pretoria there
are now 500 additional competing rooms. Price-wars are expected to be a
marketing staple for the foreseeable future.
Against this background, notwithstanding drastic cost-cutting measures and
tighter management controls, the decline in suite occupancies and rates which
were noted in the commentary to the interim results for the six months ended 31
December 2009 ("2009 interim results commentary"), continued. Segmental revenue
for the Hotels segment for the year ended 30 June 2010 was R58.6 million, 67%
below budget and R3.1 million lower than in 2009. Overall, the Group sustained a
loss of R2.5 million compared to a loss of R9.7 million in the previous
corresponding period.
Headline loss for the Group was R9.1 million, which is consistent with the loss
of R9.2 million in the previous corresponding period.
On a positive note, the Group remained in a strong financial position. Total
assets increased by 7.4% from R364.0 million in the previous corresponding
period to R391.1 million.
Current assets, comprising mainly of trade and other receivables, cash and cash
equivalents, increased by 206% from R14.3 million in the previous corresponding
period to R43.7 million.
Net asset value per share for the year ended 30 June 2010 was 66.3 cents
compared to 67.1 cents in the previous corresponding period.
Operations
The refurbishment of the nine hotel properties was completed in time for the
SWC. Originally, the Group funded phased upgrading from internal resources,
however, as reported in the 2009 interim results commentary, when this was no
longer possible, additional funding was sourced from the Industrial Development
Corporation ("IDC") in early 2010 to complete the upgrade programme. At the same
time, to facilitate cash flow, The Don negotiated a repayment moratorium with
the IDC until 1 January 2011. The property improvements and The Don`s renouned
service standards enabled The Don to deliver accommodation of a very high
quality during the SWC. The upgrade investment of R9.7 million enhances asset
value and places The Don hotels at the top end of three-star status. A further
benefit is the return of major corporate clients, some of whom last patronised
The Don five years ago.
The Don`s efforts to increase the number of hotels through its subsidiary, Bay
Drive Trading 84 (Proprietary) Limited, was not without its challenges. Of the
four additions planned during the reporting period, only two were completed.
These are The Don Savoy located in Kimberley, and The Don Heritage Square
located in Krugersdorp, which were acquired on 1 September 2009 and 1 March
2010, respectively, both of which are lease-management agreements. The rental
pool management arrangement governing The Hyde in Cape Town, which was taken
over on 1 October 2009, was subsequently cancelled on 28 February 2010. The Don
Sir Lowry, which is also governed by a rental pool agreement dated 1 April 2010,
will lapse on 31 October 2010. The board deems that the return on investment in
rental pool hotel take-overs is not sufficiently profitable to warrant the
continuation thereof, as they typically add to increased expenditure in staff
costs, general expenses, depreciation and rent, which nevertheless, the Group
kept below budget. To counter these increased costs, measures expected to reduce
costs by more than R1 million are being implemented. Procurement costs were
also reduced as new suppliers and better prices were negotiated. A moratorium on
staff replacements was also in place.
Marketing statistics are indicating a rising trend in travellers using the
internet for personal travel and accommodation reservations. Whilst The Don
continues to cultivate and strengthen travel agency relationships, the board has
placed increasing reliance on online platforms for domestic and international
bookings, using `booking engines` servicing the United States of America, Europe
and Asia. To this end, a real-time credit card payment facility linked to The
Don`s website will be in place from December 2010. The website itself recorded
increased client visits, which contributed a significant percentage to sales
revenue, with 40% of total revenue attributable directly to website visits. The
Don capitalised on its valuable exposure in Africa through its association with
MultiChoice DSTV`s popular `Big Brother` series focused on African participants
by embarking on joint marketing activities with iKapa, national and regional
airlines, and SA Tourism to further infiltrate the market on the continent.
BOARD MEMBERSHIP
During the reporting period, Mr Carel van Zyl was appointed as an independent
non-executive director with effect from 26 November 2009 and Mr Kelly F Clinton
resigned as independent non-executive director with effect from 21 September
2009.
SUBSEQUENT EVENTS
The board is not aware of any facts or circumstances of a material nature that
have occurred between the accounting date and the date of this report.
BASIS OF PREPARATION
The condensed consolidated results have been prepared in accordance with
International Financial Reporting Standards, the requirements of IAS 34 (Interim
Financial Reporting), AC 500 statement and in compliance with the JSE Listings
Requirements and the Companies Act, 1973 (Act 61 of 1973), as amended.
The accounting policies applied in preparing these condensed consolidated
results are consistent with those presented in the annual financial statements
for the year ended 30 June 2009 except for the application of IAS 1 and IFRS 8
which is applicable from years commencing 1 January 2009 and require additional
disclosure.
REVIEW REPORT
The condensed consolidated results for the year ended 30 June 2010 have been
reviewed by PKF (Jhb) Inc, whose unqualified review report is available for
inspection at the Group`s registered office.
DIVIDENDS
No dividend has been declared or paid.
PROSPECTS
The Reserve Bank`s recent reductions in interest rates in an attempt to `kick
start` the economy will hopefully result in the increased return of corporate
and individual business and vacation travel, which will benefit the Group.
With the agreed moratorium on capital repayments to the IDC until 1 January
2011, the pause on upgrading costs, and an enhanced competitive suite hotel
product, the Group`s focus going forward will be on increasing sales through a
re-structured marketing department.
In a hospitality market beset by robust competition, The Don is anticipating
that its strengthened relationships with travel agencies, the efficacy of
internet reservation systems, and dedicated service delivery from committed
staff will assist in achieving budgeted revenue by 30 June 2011.
From September 2010, uncompromising measures to reduce overall operating costs
are being implemented to offset low price-war tariffs. The management of iKapa
are, in addition, undertaking cost-cutting steps of their own to take advantage
of improving the tourism business.
Whilst it is encouraging to note that the Hotels segment revenue in the first
months of the interim period to 31 December 2010 is meeting target, the board is
cognisant of the fact that the most important goal for the Group going forward
is the return to profitability.
By order of the board.
Salukazi Dakile-Hlongwane Thabiso Tlelai
Chairperson Chief Executive Officer
29 September 2010
Directors:
Salukazi Dakile-Hlongwane* (Chairperson),
Thabiso Tlelai (Chief Executive Offi cer),
Uviwe Mzilikazi (Financial Director) Professor Francois Viruly*>,
Max Maisela*, Carel van Zyl*
* Independent Non-Executive Directors >Dutch
Company Secretary: Whitney Green
Registered Office:
65 Kyalami Boulevard, Kyalami Business Park, Kyalami, 1684
Transfer Secretaries:
Link Market Services South Africa (Proprietary) Limited
Sponsor: Merchantec Capital
Auditors: PKF (Jhb) Inc.
Date: 29/09/2010 17:16:01 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
